When should I switch my very aggressive asset allocation to a moderate one?

In my 403(b), I've accumulated $150K (still contributing) and have an all-equity fund allocation. I'm currently 47 yrs old and thinking of changing my allocation to a moderate one 10 years from retirement and then to a conservative one in retirement. Is that a sound plan or too risky of one?

Financial Planning, Asset Allocation
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November 2017

The general rule is that you should match your assets to your investment time horizon.  In your case, if you plan to retire at 65 you are 18 years away from needing to take any money from your 403(b) (or the rollover IRA you will create between now and then).  If you have savings that are sufficient to live on between retirement and age 70-1/2 (when you HAVE to start taking money every year) then your retirement investments can grow untouched for over 23 years.  Then, you will only be taking a small amount each year for the rest of your life.  So some of your savings is earmarked for each year of your life from 70 on up.  This makes you a long term investor.

A long term investor should own equities and not be fearful of short term risk.  If you put money into conservative assets (bonds, say) you are accepting a lower return in exchange for less fluctuation in value.  If fluctiation does not affect you because you are over 20 years away from needing the money, then accepting a lower return is dumb.  I call it the "risk of safety" and over time the cost could be very large.  I know there are formulas out there that tell you to have X percent of your money in bonds at such-and-such an age; but that's a snare and a delusion.  Not everyone your age has the same ability to take risk as you do.

After you retire I recommend that you keep about 2-3 years of living expenses, plus something for emergencies, in something low-volatility and hold the rest in high-quality stocks.  For now, 100% equities is the best choice.  Invest in high-quality companies and don't worry.

November 2017
November 2017
November 2017
November 2017